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"The Kremlin Is Making A Profound Mistake"


International Business: Russia

"The Kremlin Is Making a Profound Mistake"

Putin's grab for TV stations could kill press freedom

Vladimir Putin is stepping up his game of political hardball with Russia's media barons. On Sept. 7, tycoon Boris A. Berezovsky announced that, in response to Kremlin calls to give up his 49% stake in ORT, Russia's largest television network, he would bestow the voting rights for all his shares on a group of Moscow journalists and cultural icons. End of the government pressure? Hardly. Two days later, on Kremlin orders, ORT yanked a popular politics show anchored by Sergei Dorenko, a Berezovsky ally.

The stakes in this game are high, and the contest threatens to reshape the nation's television--and even political--landscape. Aside from ORT, 51% owned by the state, there are only two other major nationwide television channels. One of them, Russian Television & Radio (RTR), is already 100% state-owned. The other, NTV, is privately held by Kremlin critic Vladimir A. Gusinsky. But Gusinsky, like Berezovsky, is being squeezed by the Kremlin. He's under heavy pressure to hand over a controlling stake in his Media Most Holding Co., NTV included, to state-dominated Gazprom, the natural-gas monopoly.

The odds are increasing, then, that Putin's government will soon enjoy a virtual monopoly on Russia's television industry. That would give the Kremlin almost unlimited sway over public opinion nationwide. Although Russia boasts numerous muckraking newspapers and Internet sites, TV is the most important medium--especially in remote regions far from Moscow and St. Petersburg.

Putin's policy is sophisticated: He declares he supports freedom of the press, even as he seems to clamp down on it. On Sept. 12, his Security Council issued a new "information security doctrine" aimed at "strengthening state mass media" and ending "the spread of disinformation" in Russia. That could lead to new laws regulating foreign and local media--a prospect feared by opposition politicians. "What Putin has to understand is that opposition media come as part and parcel of a democratic society," says Irina Khakamada, co-leader of the liberal Union of Right Forces. "The Kremlin is making a profound mistake."POWER PLAY. Mistake or no, the Kremlin is fed up with the media tycoons. Berezovsky's ORT has savagely criticized Putin's handling of the Kursk submarine disaster. As for Gusinsky, his NTV has been a tough critic of Putin's Chechnya campaign. Although the moguls are resisting the takeover of their businesses, it doesn't look good for them. Berezovsky's plan to hand over his 49% stake in ORT to a trust led by journalists could fail as the Kremlin plays on the public suspicion that he will continue to manipulate the channel from behind the scenes. Meanwhile, pressure is mounting on Gusinsky to cede control of his company to Gazprom, which already owns 14.3% of Media Most. Gazprom says it is owed a controlling stake in the holding in return for a $211.6 million loan it paid on behalf of the group earlier this year.

Ironically, the Kremlin is tightening its grip on the TV business just as it is recovering. After a slump prompted by the August, 1998, financial crisis, TV advertising has jumped from $150 million to $250 million this year. Ad execs predict annual growth of 20% to 30% over the next few years.

Putin's motives, however, are more political than economic. While he says he won't revive Soviet-style censorship, no one knows how far he will push his information policy. "No free media means no free elections, and we could be faced with a type of state like [authoritarian] Belarus," warns Khakamada. Unfortunately, Putin seems to be positioning his country for a future like that.By Catherine Belton in MoscowReturn to top

TABLE

How the Kremlin Is Trying to Control Russian TV

ORT

The Kremlin has a 51% stake in the channel, which is watched by 99% of the population. Now, the Kremlin wants the other 49%, controlled by tycoon Boris Berezovsky. It may force Berezovsky out by calling for a review of the channel's privatization or pushing out managers and journalists close to him.MEDIA MOST

The Kremlin arrested owner Vladimir Gusinsky for alleged embezzlement, then dropped charges. Now, it is gaining leverage through the media arm of state-controlled Gazprom, which owns 14.3% and is owed $211.6 million for a loan to the company. The Kremlin is pushing Gazprom to demand a controlling stake in lieu of payment.RTR

Already 100% owned by the state, it is watched by 97% of the population. The channel doggedly follows the Kremlin line and has preferential access to big stories, such as the Kursk submarine disaster.

DATA: BUSINESS WEEKReturn to top


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